Update Apr 2008

Knowledge Management Reduces Risk in Shipping

Introduction
An insurance company risk management is about calculations. It is about measuring risk, appreciating its financial and social consequences, and then taking actions accordingly.
But, insurance companies are dealing with risk in statistical samples of thousands of insurance policies.
They are not losing their reputation and they do not go to jail whenever there is an accident. They are involved in millions of incidents a year.
Similarly, in the design stage of processes and hardware, risk related statistics are important.

However, the concept of risk management for a ship operator is very different.
Risk management for a ship operator is a decision making issue rather than an accounting issue or probability calculation. Decision making is primarily about retrieval of experience, not formulas.
Additionally, operational risk management includes co-ordination issues, training issues, discussion and reminding. So besides common sense, if there is any additional help required in operational risk management, it is the need for timely routing and retrieval of information rather than back to school for more mathematics.


Goal conflicts cost money
Let's imagine an octopus. The octopus has arms doing what they do and now he would like to manage those arms. He relies on information about how each arm is feeling and he sends that information to the health and repair processor in his brain. The octopus needs some food so he tells an arm or two to get some. The octopus needs a mate so he informs his eyes to keep on the alert for one. He has lots of data coming in. What if the arm that was looking for food finds a potential mate instead? What if the arm that is injured wants to slow down and rest when the eye has just spotted an enemy?

A shipping company has many different actors. They each pursue their goals. Often, they are ignorant of the goal pursuits of the other players on the team. However, this does not result in the attempt to drive the ship in two different directions simultaneously because ships have captains. Strict hierarchies help resolve goal conflict situations at board meetings in companies. But, on a ship, the engineer is not always at a meeting with the captain. The captain may be busy with the port pilot and charterer, and may not know that it would be a good idea to work on a problem with the crane soon. The engineer may not know that the only window of opportunity to fix a key engine part will be during unloading of cargo when he knows he isn't supposed to be working. The man negotiating the chartering agreement may not know about the extra oil that will be needed because of predicted bad weather.

Each time one arm of the octopus has to sit idly by, because what it wants to do is not ready to be worked on, time and money are wasted. The multiple-brained ship needs a central processor that tracks all the goals and plans of every arm. Without this, money is wasted.

How can this be done?
There is a lot of data coming in but the octopus has some pretty simple software in his brain to manage all this. When things are complicated, all the Enterprise data is of little use unless there is some way the octopus can tell that the spare that was ordered is in the wrong port because the ships just changed schedule, the repair is going to be delayed beyond the allowed period, and the new schedule imposes even more risk on account of the overdue repair.

E-mails, documents, and Enterprise Systems data have thing in common. They are already on a computer somewhere, they all relate to issues and problems that take place on board and in the office and no one besides the people for whom they were intended is paying attention to them. With all this data and no wise entity processing it all and seeing what relates to what in the larger scheme of things, it could lead to a paralyzed octopus.

Knowing what is going on at the highest levels is possible through intelligent indexing of enterprise information that knows about shipping processes and understands where every piece of data fits in. Such people exist in small enterprises. In large enterprises, this job must be, and can be done by proper indexing far beyond the realms of library catalogues, but very much a part established practice regarding how people are naturally reminded.

The role of knowledge management in reducing risk in shipping

The octopus needs to know if it has seen a given situation before and whether the actions it took then were right and should be done again, or if they were problematic and need to be fixed. At the root of its ability to do this is the ability to find information previously stored that is most like new information that is currently being processed. This is, in some sense, all there is to it. When similar things are grouped together a system can begin to make generalizations about them and learn from experience.

Operators need to insist that discussions and decisions that reduce risk in particular situations are captured and stored and -most importantly- found without being searched for when similar situations arise.

How does the octopus do this? It doesn't have documents but it does have experiences that it records in some way.

The question is, of course, how the system can know what the enterprise is up to and how it can make what it knows available to help. A second, equally important, question is how the system will know what has happened and absorb new information about new events effortlessly. It is clear that humans do this quite mindlessly. The system must do the same.

Humans know what goals they are pursuing (although admittedly much of this knowledge is not conscious). Our task is to empower the system to know what goals the actors in the enterprise are pursuing.

Summary
Risk management is always be done wrong if there is:

  • Bad coordination
  • Insufficient discussion of issues at hand
  • Lack of experience in identifying risk
  • Lack of corporate memory which means the collective past experience
  • Lack of good indexing of this experience
  • If what is known is not delivered just in time

In a world where there are 100 actors, there are many potential inefficiencies. These inefficiencies carry risk with them, cost money, and cause missed opportunities. If an actor doesn't know what is happening with respect to another actor's goals and actions, it is likely that at some time, there will be a goal conflict, missed opportunity, and serious risk. Organizing one's personnel is thus a key issue in shipping. If you don't know something is happening, you can make a mistake. Missing information causes mistakes to be made. These mistakes can be, from time to time, quite serious. The octopus must know what its arms are doing or it will try to go in opposite directions on occasions, causing it to be eaten.

Alerting actors about potential disasters related to things they are doing at the moment, because others are doing conflicting things at the same moment, is a seriously important idea.

People have been managing risk for ages. Risk management is not a science. It is a process and smart software can enormously improve this process.